Moody’s, the bond credit rating business, has predicted that the decision of the UK’s government to increase the minimum wage will ultimately result in an elevation of FMCG costs for consumers, theguardian.com reports.
The chancellor of the exchequer, George Osborne, has increased the minimum wage for people aged 25 or older by 11 per cent, from £6.50 an hour to £7.20 an hour. The change will come into effect next year.
Moody’s believes the British consumer will ultimately bear the brunt of this, with Sven Reinke, one of its analysts, stating, “If the big food retailers could put up prices, they would do it now but the market simply doesn’t allow it, so I’m sceptical that the large food retailers would be able to pass on 100 per cent of the costs in today’s market.
“When you go to a supermarket today you already see self-checkouts which have reduced labour intensive costs and I would expect that kind of automation to increase quicker than anticipated.”
Moody’s also conjectured that the change might work in favour of discount supermarkets, as their labour expenditure is lower than that of traditional UK chains.
The increase of the British minimum wage may also lead to losses of employment, Reinke added, “Just a percentage point reduction would have a material impact on the total numbers. I don’t think it’s unreasonable to expect that there would be a lot of job losses."
